The Ultra-Rich have stopped shopping - sounds silly, right?
According to a Moody's survey, the richest 0.1% of Americans now control about 14% of the nation's wealth. Yet, they are no longer spending on luxury watches, sports cars, or gaudy mansions. There are now over 3,000 billionaires in America, up 2,800 from last year. With the sudden influx of wealth, you'd expect more trips to the Rolex store, but the opposite is happening.
In the traditional sense, spending on art, private jets, and multi-million-dollar mansions is actually slowing down. Knight Frank's luxury investment index (which tracks how the ultra-rich spend their money) climbed more than 70% from 2015 to 2023. In 2024, that same index saw a decrease of 6%. What changed, you ask? To understand that we need to know what makes these "luxury" goods luxurious to begin with. The multi-million-dollar price tag for fine art stems from the scarcity of the good. If Rembrandts were common, no one would be willing to pay top dollar for them. Enter the "rarity premium" or the idea "that I have what others can't." The rarity premium has long defined what luxury goods are.
The New Era:
Instead of buying assets, the ultra-wealthy are paying for access. The Economist built an "Ultra-Luxury Services index" to illustrate this paradigm shift, which tracks things like Super-Bowl Tickets, Wimbledon seats, and dining at three-star Michelin restaurants. Since 2019, the index has risen by over 90%. With the new age of social media, it's no longer about who owns the most expensive bottle of wine, but rather who can post pictures from the hardest-to-get-to get to places. For the new era of wealth, it's no longer about possessions; it's about presence. Instead of changing watches, the new wealth is changing the status quo of what it means to be rich in America.
